Achieving Greater Inter-Local Equity in Financing Municipal Services: What We Can Learn from School Finance Litigation

In scholarly examinations of urban deterioration and middle-class flight to the suburbs, the proposed solutions almost always incorporate a call for greater regionalization-a more even distribution of burdens and resources over the metropolitan area.1 Much of the regionalist discussion has focused on the efficiency gains in administering services such as public transportation, water treatment and solid waste disposal over a wider area. A number of academics and practitioners also take seriously the proposition that equity concerns and redistributive principles should drive regional ization. One widely-discussed idea is pooling property taxes over a metropolitan area and redistributing the revenues according to a formula that acknowledges that some communities bear a disproportionate responsibility for providing services for the poor and needy of the region.2 A few noted successes in financial regionalization-primarily the Minneapolis-St. Paul metropolitan area-- are repeatedly cited to support the argument that such arrangements bring in greater equity and efficiency in the financing and administration of municipal services, benefiting inner-city and suburban communities alike.

At their core, tax-sharing proposals challenge the traditional presumption that financing local services is a local affair that is correctly delegated to and controlled by local governments. Pooling even a small portion of the property tax base regionally requires letting go of the notion that the residents of a local subdivision have the exclusive right to determine how much they will pay for the provision of municipal services and how the collected money will be spent. Because there is no constitutional requirement that municipal services be funded from local property taxation, state legislatures have the authority to change how governmental services are financed. But legislatures lack the political will to make such changes because wide constituencies (mainly voters from middle-income and wealthy suburban communities) have an economic interest in keeping their taxes in their own communities. The result has been a political stalemate that has frustrated the implementation of any regional system of financing government services.4

In their search for ways to promote regional cooperation, public funding experts have routinely overlooked the one area of local financing where questions about the legitimacy and wisdom of local finance have received active and heated attention in the past three decades-public school financing. Beginning in the late 1960s and continuing through the present, state courts have repeatedly rejected local fiscal autonomy as a sufficient justification for allowing the quality of public education to vary by district wealth.5 The courts have struggled with many of the same questions that now confront scholars interested in divorcing other governmental services, such as police and fire protection, sanitation, street repair, or emergency housing, from local wealth. Yet, the scholarship on regionalization has never seriously attempted to apply the reasoning of the school financing cases to support broadening the burden of paying for governmental services.

This article attempts to fill that gap. It is important to acknowledge from the start that the school financing cases are rarely entertained in the tax-sharing literature, in part because education is viewed as having a special constitutional and societal status. Many experts assert that this status makes the legal reasoning of these cases only marginally applicable to the financing of "less privileged" municipal functions.

Nevertheless, exploring how and why the school financing cases have been so successful in undermining the dogma of local control is a useful exercise that sheds light on the types of arguments and analyses likely to succeed in support of widening the tax base for other types of municipal services. In particular, two ideas emerge from these cases. …

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